Q4 2022 Ameresco Inc Earnings Call
Good day and thank you for standing by welcome to the Q4 2022, <unk> incorporated earnings Conference call.
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Today's conference is being recorded no not like to handle conference over to your speaker today, Ms. Leila Dillon Senior Vice President of marketing Medallion. Please go ahead.
Thank you Chris and good afternoon, everyone. We appreciate you joining us for today's call. Joining me here are George Sacco, Lawrence <unk>, Chairman, President and Chief Executive Officer, Doran Hole, Executive Vice President and Chief Financial Officer and Chip.
<unk> Senior Vice President and Chief Accounting Officer.
Before I turn the call over to George I would like to make a brief statement regarding forward looking remarks.
Today's earnings materials contain forward looking statements, including statements regarding our expectations.
Forward looking statements are subject to risks and uncertainties. Please refer to today's earnings materials. The safe Harbor language on slide two and our SEC filings for a discussion of the major risk factors that could cause our actual results to differ from those in our forward looking statements.
In addition, we use several non-GAAP measures when presenting our financial results. We have included the reconciliation to these measures in our supplemental financial information I will now turn the call over to George George.
Thank you Leila and good afternoon, everyone.
I am pleased to report ordinary course, great performance for 2022.
We just completed our fifth consecutive year of record revenue and profit.
We achieved revenue growth of 50%.
And adjusted EBITDA growth of 34%.
This robust performance reflected how well our advanced technology portfolio and capabilities.
Aligned with market demand.
Yeah, My Exco team.
Third this impressive full year results, well navigating challenging global issues.
The fourth quarter was impacted by push outs related to scheduling changes in implementation supply chain issues and unplanned maintenance at two of our LNG facilities.
Some of these timing related issues will likely continue into the first and second quarter of 2023, but we believe that they are short term and that business will normalize in the second half over the year.
Even in light of these push outs in the very difficult comparisons we will face this year from the unusually large southern California Edison contracts.
We are very pleased to be guiding to growth in our target our Q3 adjusted EBITDA.
As expected year over year growth is a true validation of our diversified green tax business model.
Market activity and demand conditions remain very healthy with heightened promotional activity.
Customers continue to evaluate it.
Recently enacted inflation reduction act and they are working to prioritize the type and timing of their project.
The support for a very broad range of technologies provided by the <unk>.
Greatly favours comprehensive solution providers, such as MRI at school.
We believe this is more transformational legislation affecting our industry, providing long term runway for advanced clean technology deployments for years to come.
2020 to Mark take a year for major accomplishments in euro.
Lowering our Decarbonization award with the city of Bristol in the UK.
In addition to being selected for this transformational net zero municipal project a great joint venture.
<unk> also selected us.
The contractor for the under megawatt PV project in Northern Greece.
Both of these projects not only represent very large contracts for them or at school, but also some of the largest in their respective geographies and thus significantly raising our original profile.
In the fourth quarter, we announced the acquisition of a five megawatt wind farm in Ireland.
And today, we are excited to announce an agreement to acquire and of course, an Italian based energy services company.
Acquisition.
Alright, this mrna sequencing European footprint by adding local resources customers and a new pipeline of work throughout Italy.
This also supports our growth strategy for the C&I markets.
And of course get a strong portfolio of commercial and industrial customers.
They have a history of profitability and we expect this acquisition to be immediately accretive.
Now I would like to talk about renewable natural gas.
With over 20 years.
Particularly integrated experiencing self developing biogas plants, we are one of the leading players in the R&D space.
Federal incentives in the transportation market plus a push by large institutions utilities universities and corporate customers should make this a very attractive market for many years to come.
We believe we have significant competitive advantages in developing constructing and operating these plans.
Navigating the many authorities permitting agencies and equipment suppliers.
We don't give biogas plants.
Our assets and development pipeline, we believe our <unk> franchise will contribute.
Continue to be a significant driver in shareholder value.
Now I would like to provide a quick update on the southern California Edison project.
As we noted in the third quarter of 2022, Southern California, Arizona instructed us to adjust the project schedules into 'twenty.
So in Q3.
We're also continuing discussions regarding COVID-19, and weather related forced measure relief.
We anticipate the project convenience service prior to the summer of <unk> 23.
Our relationship with Southern California, Arizona continues to be very cooperative.
Their knowledge and expertise we have gained from this and other large battery storage and Microgrid projects helped make us one of the go to company in the industry.
We look forward to announcing additional ways in these areas in the future.
Finally, our environmental.
Jill and governance programs and goals remains a top corporate focus.
We were very pleased to be named a silver winner in the best place to work category by the best in Biz Awards.
I'm very proud of our company's culture of caring for the communities in which we sure as well as our employees customers and stockholders I will now turn the call over to Dora to comment on our financial performance and outlook.
Thank you George and good afternoon, everyone.
For additional financial information, please refer to the press release and supplemental slides that were posted to our website after the market close today.
The <unk> team delivered another year of record financial results as all four of our business lines experienced solid growth and profitability.
Full year revenue growth of 50% was led by our project business as we continued to execute on the socal it projects.
This growth was complemented by the strong performance of our other three business lines energy assets O&M and other leading to adjusted EBITDA growth of 34% to a record $204 5 million.
We started to face difficult year over year comparisons in our project business during the fourth quarter of 2022, given that our work on the large FTE projects commenced during Q4 of 2021.
We expect this to continue through the third quarter of 2023.
These difficult quarterly comparisons together with the challenges that George mentioned previously resulted in year over year declines in project revenue.
Energy asset revenue was down year on year by 6% due to unplanned maintenance issues at two of our R&D facilities in Q4.
But these plants are now operating at their expected output.
On the other hand, our O&M business line delivered another solid quarter of 5% growth as we continue to attach O&M contracts to our projects, especially those with the federal government.
And our other revenue line had another quarter of double digit growth up 16%.
As we expected our gross margin increased to 18, 6% a 150 basis points ahead of the prior year as the lower margin Socal Ed contract declined as a percent of our total revenue mix.
We generated adjusted EBITDA of $41 $3 million in the quarter.
It is important to note that the quarter was impacted by higher than expected interest expense as the extension of the FTE projects required us to carry substantial working capital.
Our contract allows for cost relief and we have included this additional interest expense and the proposed cost recovery that we have been discussing with Socal Ed.
Total project backlog was a healthy $2 6 billion at the end of the quarter, even in light of the substantial conversion of SCE project backlog to revenue.
Of note.
Our awarded backlog grew 6% compared to last year, continuing to build momentum for future project revenue.
<unk> expanded its portfolio of operating energy assets to 389 megawatts in our owned assets and development was 470 megawatts at the end of the year.
As a reminder, we are disclosing in our supplemental slides both the total assets in development as well as a pro forma net megawatt total after adjusting for our partner's equity interest.
Our nationwide Greenfield solar and storage development group continues to build up its pipeline of early stage front of the meter opportunities.
We expect the volume of these opportunities to grow driven by the numerous IRA incentives related to these assets.
Our ability to finance these energy assets remains strong as we secured a $137 million in additional project financing during the quarter, bringing our total financing for the year up to $468 million.
We believe <unk> unique business model affords us substantial forward visibility given the combination of project backlog O&M backlog and the estimated contracted and market pricing revenue from our energy assets.
Together these lines of business provide a path to over $6 billion in future revenues.
In previous quarters, we have only reported estimated contracted revenue and incentives for our operating energy assets.
As George noted earlier, we believe that our RMG franchise is a significant driver of value to our stockholders.
To help show a more complete picture of our R&D asset value proposition. We've started providing an estimate for the uncontrolled did R&D revenues that we expect to generate over the life of these assets.
Using conservative assumptions for asset life in merchant market pricing for rents. We estimate these revenues again, just from our operating our LNG assets to be an additional $1 2 billion.
On top of the over $1 billion of contracted revenues from all of our operating assets.
This projected R&D revenue is based on RIN prices of $1 50 per gallon brown.
Brown gas at $3 50 per M and Btu and <unk> revenue were applicable at $3 per <unk>.
We've assumed an average asset life of 20 years.
Of course, we still have the option to enter into longer term off take contracts. If we feel we are creating additional value by doing so.
I'll reiterate that the $2 $3 billion in revenue visibility only relates to our assets that are currently operating and does not include any expected revenue from our 470 megawatts of energy assets in development and construction.
As those assets began operating we in turn expect to add significantly more revenue visibility to our profile.
Turning to guidance.
2023 guidance anticipates adjusted EBITDA growth of 5% at the midpoint.
We're very pleased to be guiding to this growth even as we faced difficult comparisons due to the large SDE projects.
We anticipate placing between 80 and 100 megawatts of energy assets in service during 2023.
The three RMG plants, we had expected to be mechanically complete by the end of 2022 continue to progress.
Their schedules were impacted by permitting delays and longer lead times on certain types of equipment.
Looking forward, we expect these three plants to be operational this year.
And we also have several additional R&D assets in late stages of development.
We expect this four or five of those will come online during 2024.
Our expected asset Capex for 2023 is 325 million to $375 million.
Majority of which we expect to fund with non recourse debt.
As we look to the first quarter.
We estimate revenue to be in the range of $220 million to $240 million and adjusted EBITDA of $20 million to $30 million.
We expect non-GAAP EPS to be slightly positive.
As George noted, we expect Q1 to be impacted by push outs on a couple of large projects on top of our normal energy asset and project seasonality.
Furthermore.
Net income will be impacted by the continued carrying cost of FTE related working capital.
We expect the remainder of 2023 to follow our normal cadence with progressive improvement throughout the year.
Now I'd like to turn the call back over to George for closing comments. Thank you Darren we maintain an excellent light.
Upside to our 2024 target.
Million in adjusted EBITDA.
As governments and institutions around the world invest in solutions addressing climate.
Geopolitical and budgetary challenges MRA score continues to enhance our expertise to provide solutions positioning us for robust profitable long term growth.
Finally, we look forward to welcoming analysts and institutional investors to our European Investor Day being held in London on May 11th.
Ben will feature presentations and panels by key executives from our leadership team with discussions for us an hour.
Expanding growth opportunities, including our plans for continued expansion in Europe .
Operator, we would like to open the call to questions now.
Thank you.
As a reminder to ask a question. Please press star one on your phone and wait for your name to be announced.
We ask all participants to limit themselves to one question and one follow up to withdraw your question. Please press star one again.
<unk> Z compile the Q&A roster.
One moment please for our first question.
Our first question will come from Noah Kaye Oppenheimer <unk> Company. Your line is open.
Hey, good afternoon, thanks for taking the questions.
Hey, Thank you I Wonder if you could start by giving us just a bit more color on some of the timing and scheduling challenges around the R&D development, obviously, you mentioned permitting supply chain.
I don't know the degree to which you can get granular, but just your line of sight to those challenges being resolved here in the first half of the year.
Anything that we should consider top of mind in terms of.
Key milestones that you have to hit to bring those projects online.
I guess.
We started out with some difficult government initiatives and even though in some cases, we got the environmental permit we got stuck in the adult impairments.
Things that will take us normally.
They took several months.
Ed.
In one case as much as six months.
They delayed the other thing that's helping a lot for example, a couple of sites.
Spectrum to measure equipment delivery last July and August and then you turn out that we got the delivery.
In late December and early February for the other one this year for example.
So what we did going forward with Grubhub.
The schedule very very very carefully and that's why we said we will have risk.
<unk>.
Completed this year.
They are all mechanically completed by the middle of the year.
Then.
The other four to five plants.
A good part of them in the construction or impairment.
Advanced development stages right now.
We built by the boat the bottoms up and.
We never anticipated the supply chain issues will be that way.
Thanks.
Another example, the rainstorms in California, one of this I have to wait until.
We've done all kinds of Exar version of that so on it.
And so everything got wiped out the answers that basically from scratch.
I don't know if you want.
To add anymore color to it but we.
We have scrubbed.
The numbers very carefully in the schedule and we have factored in our guidance not only for this year and for the next year as well.
That's very helpful. I guess sticking with the theme of of R&D development, because you talked about having I think you said 20 biogas projects in development at biogas, rather than RMG and I'm, just wondering with all of the policy developments that are supportive of biogas assets.
Some perhaps more for R&D.
Perhaps more beneficial to landfill gas to electricity just how are you thinking now about planning an optionality for your b or biogas assets I think it's pretty clear what youre correct.
Year for LNG.
Excellent.
Last year, we had said the five to six plants, we think one or two sites one side that you had.
Electric we're going to convert it to a renewable natural gas we stop that because we think the optionality now to the hearings.
The what comes.
Through.
The EPA.
We did and it was another plan is we're going to expand it and go.
Go to renewable natural gas now we are in the permitting stages, most likely will go electric.
So.
The economics.
The ones that we have right now that we have all the equipment in the Florida, we've talked 4% to five.
It will be.
Renewable natural gas as we go down the road I think some other ones that might turn out to be here.
Landfill to electricity.
Okay.
Okay, great I'll, many more but I'll turn it over thank you. Thank you.
Thank you.
One moment please for our next question.
Our next question will come from Stephen <unk> of Stifel. Your line is open.
Alright, Thanks, good afternoon everybody.
Okay.
I guess two for me what I'd start with.
George you mentioned some confidence on your $300 million EBITDA target and that's a pretty steep ramp project gets 40% gross and 24 versus 23 can you could you talk a little bit about sort of a path to get there.
Yes.
We looked at it very very carefully and we look at the.
Contracted backlog awarded backlog and.
And the contributions that we will get not only from the LNG assets, but the other the rest of that we place it into whether it's solar or battery storage and so on and we feel very comfortable that way I look at it though is it 40% and jobs from 2023 to two.
2024, but if you were to look at it from 2000.
Tony total 34.
It's not that much out of line between the two newest it's 45% growth, which is starting at 2% growth for each year and if you go in.
The path we're on.
And a little bit lumpy business, but.
Bill.
Talking for a number we feel very comfortable because it's basically.
Contracted backlog awarded backlog and assets that we have.
Very good handled and put in operation.
Great. Thank you George and then the other thing I wanted to just ask you about was just.
Just on the contracting side in general.
It feels like things are progressing pretty well sequentially as far as.
Your backlog is concerned just when you're talking to customers and given the inflationary environment of interest rates what are the conversations like.
Has there been any impediments to getting these deals across the finish line.
Because of the interest rate.
It is the impact that the business in a couple of push outs that we have a very large project I'm talking in the covenant between all of them on the $150 million project.
One of them.
Facility.
The way it's a good.
Excellent example to remind everybody of the process, but we did a detailed and Europe . Then we're willing to change the scope was a client and then the price and that we go out to get the financing and then what's happening. This incident the financing now when we hit the coupled almost couple of points jump on the interest rate interest rate.
And then the same.
Same as within finance and overall the project. So we go back to the drawing board and renegotiate the scope of the project and so on.
So that will go out on the projects and the other one it was.
Our municipality, but because of the higher interest rates that you have to go out and reach.
Sinus.
Some niches that you're bidding.
No.
It's a concern, but lately, though what's happening a little bit and Thats why in my comments I said, the customers and trying to prioritize the project and the timing because some of them now are they getting money from the IRS.
Waiting to see how much that when they get from the IRR and how it would impact that.
We have capital project, we think that we're getting a good chunk of money.
And actually the project will grow but.
There is I would say that a little bit.
Wait and see.
Until everything that comes out but the activity, though the request the activity and pipeline is growing a lot. That's why we feel very comfortable.
For the business going forward.
Very good thank you for the color.
Thank you.
Thank you.
And one moment please for our next question.
Our next question will come from Craig Watson Koski of whether it research and advisory LLC. Your line is open.
Hey, guys. Good afternoon. Thanks for thanks for taking my question.
Wanted to ask you about <unk> could you just.
Talking about the origination of that relationship.
It'll be a market that you were actively targeting before this.
Does it make it easier to expand into additional territories thinking.
France, Spain, Portugal those areas.
Does the business help with any other existing operations that you have in Europe kind of thinking probably more like <unk>, but just trying to understand.
Any synergies there thanks.
That's a very good question.
You might recall that we have targeted Italy is one of the countries that we wanted to expand so what do we have that baked.
Internal intensive effort.
The market did.
What we did in identifying potential complaint that we might want to acquire and we approach. This particular company and then.
People made the arrangements that we will make.
<unk> call.
Mid to the management of the team and so on and then.
We've got a good maintenance then I went over there we met with them and then the whole thing went out there.
And.
They are very very very similar to what we are doing.
Basically it's an energy services company and they have more focus actually almost exclusively on the C&I customers and I asked him I said what are you focused only on this eni.
Because the government agencies in Europe finally, beginning to get their act together trying to do something but to C&I customers because of the higher cost of course, what's happened in Europe .
Very conscientious about it and we.
Have a good program that is going to help them.
So it's a very good company and we are very excited about it.
And.
We have been doing some other work in Italy with some other partners that we had in that area.
And we have some very good traction.
So those companies show the list one it gives us a solid solid foundation and what we liked the most about this company tremendous world class management team.
And even though it's a small company. It has operated like a large company and we could properly serve as a very good platform for us and in Europe .
Yeah.
It's not that great. So good.
We're looking for other companies.
We don't have anything to talk about it right now but.
Don't be surprised that we might have some something else to announce in the near future.
Got it okay. Thank you George and I know you guys can.
Can't say too much about numbers, but worth asking if you think <unk>.
Expect this to be accretive on an EBITDA or earnings perspective in 2023, and if it's baked into the guidance.
No.
But it's also we closed the deal and so on it will be slightly accretive.
But it's not going to it's.
It is included in our guidance.
Okay got it alright, thank you all guys.
Thanks.
Thank you.
And one moment for our next question.
Our next question will come from George <unk> of Canaccord Genuity. Your line is open.
Hey, good afternoon, everyone and thank you for taking my questions.
So last quarter Doron you spent some time discussing interest rate exposure.
With regards to how it impacts your capital stack and then how it impacts projects.
Projects and asset deployment could you just kind of go over that again, and just remind us exactly how rates are impacting your business and your balance sheet.
Yes sure George Thanks for the question I mean I think.
I'll start with us.
<unk> speaking.
<unk>.
We'll talk about the SC piece in a second but.
The financing we do on our energy assets is long term. So we're talking about looking at the longer end of the.
Curve for purposes of interest rate exposure and as I think you guys have seen despite maybe some recent volatility the overall shifts there haven't been near as impactful as what you've seen on the.
On the short end of the curve.
So that's kind of 0.1.
We did talk a little bit about the interest expense on the Socal, Ed push outs I think it's important.
For folks to kind of recognize that thats.
The elements that we we have the ability to include in the overall settlement of costs related to their change. So we will continue to monitor that.
Sure.
As you might expect doing all the calculations and ensuring that that information is front and center.
From the perspective of those discussions.
I guess the.
The last piece is just kind of looking at the.
The overall short term debt and I think that.
Beyond.
<unk>.
Working capital required for SCE, we're expecting all of that to normalize so that our interest rate exposure on anything related to so for short term unhedged rates.
Should be much more muted as we get through the rest of the year in particular because.
Despite the fact that we do invest some of our capital in construction and development of assets, our ability to hit nonrecourse financing like the large R&D refinancing transaction that we did in Q4 is still there that lender market hasn't loosened up we're still able to get.
Great tax equity financings using sale leasebacks.
We don't expect the overall impacts to be.
Long term.
Thank you.
And then just as a follow up.
You talked a lot about scrubbing permits and other potential delays in year, two three and 2040 EBITDA guidance can you also help us understand much as well.
Inc is a dedicated to discussing and trying to analyze movement in RIN pricing.
And I'm wondering as to.
Can help us kind of understand what youre, how much exposure you have there is and how much we should be monitoring that and potentially handicapping. Your 23 in 2000 and for EBITDA guidance based on volatility in that index.
Well, you know that 50% of the rooms.
We plan to generate towards the year.
Theyre hedged.
So the other.
50%.
On the market and we sell them is.
When we sell them.
Market is right.
And.
We have incorporated.
We have incorporated.
Prices as we think we will be able to get.
In our guidance right now.
And then I think.
Thank you.
As you might expect we're heavily engaged in following what's happening with the EPA and what adjustments will be made and we will just like you are eyes on the summer as to what will happen when they finalize the RVO, but we do feel confident in where we've kind of established R. R.
Estimates for the year based on the unhedged portion at least.
Yeah.
Thank you.
Thank you.
One moment for our next question.
Our next question will come from Eric Stine of Craig Hallum. Your line is open.
Hi, everyone.
Okay.
Hey, maybe we can just go back to 2020 for EBIT outlook and great that you reiterated that but just wanted to.
Just be clear so if youre thinking about backlog awards, not yet signed plus the operating asset that you have not yet contracted when you take that altogether or is this something where you feel like you've got.
Or what is your percentage of visibility into that number from all of those buckets. I mean are you is it a high level of confidence is there stuff that you still need to fill in or how should we think about that when looking at 'twenty four.
I will say, it's a very high level of confidence because.
When Martin does your numbers unless the 78%.
Whatever it is in the pipeline as it takes it out pretty much no we felt pretty good.
Something happened that suddenly out of our control as possible.
We feel pretty good.
We'll be able to deliver that number because you know when we established that number way back I think we were a little bit conservative.
We have a little bit you might say in the bag.
Yeah.
So that's why.
Even though we had some things happen to us.
Sales guidance and we feel good about it.
Got it that is great color and then I guess.
Last one for me just on the Socal Edison project I don't know if youre willing to discuss how much of that project is left but I guess more interested in you mentioned that as a result of that you've got a growing number of projects in your pipeline. So maybe some color.
Around those projects.
Maybe not as big as Socal Edison, but.
Big Nonetheless.
I mean.
I'll start by just saying that on the proposal front.
They are definitely coming in large and small.
As you know, it's a competitive market.
We feel like we're very very well placed to win.
A good number of those projects there is a mix of some of these projects that are going to be assets on our balance sheet as well as straight construction.
Construction contracts like we did for Socal, Ed for other utilities or other.
Are there other types of asset owners.
And from a sizing perspective.
No.
Maybe you don't see any single one that's quite the size of Socal, Ed, but when you add them all up together.
Certainly in excess of Socal is.
When you look at the proposal activity. So I think theres more to come there, we'll talk about them as they as they get into the awarded backlog.
But but I think we're definitely seeing a move toward being pulled into.
Discussions about some of those design build projects that we're really really excited about.
For SCE itself.
<unk>.
We.
Probably 90 plus percent.
95% complete by the end of 2022 so.
Yes.
From a practical perspective focusing on.
Grid integration.
The substantial completion as we said bye.
Before the summer.
Okay. Thank you.
Thank you.
Again, we'll move on next question.
Our next question will come from Christopher sooner.
B Riley your line is open.
Hey, guys. Thanks for taking my question here maybe.
Maybe just follow up on the <unk> did.
Do they have projects on the balance sheet that youre acquiring or is this more of a project business I'm curious curious if that.
Kind of evolves over time, where you'd be earning.
Assets over there as well.
Can you talk through just from a market by market perspective, what other markets are ones where.
Acquisition kind of games with all of this is the most helpful. Thanks.
Yes.
They do not have any assets on their balance sheet right now, but basically I would say a solid plan and some of the marquee customers that they have built them and then they have a conduit.
This project so they look on the balance sheet as a design built.
The project.
And they do very little O&M, that's why we think that.
There's tremendous potential for us to expand the R&M business.
And.
At the end of the day, we might take some of the assets on our balance sheet as well.
Yes.
I think it was up.
So bringing in some more additional financing.
And management and marketing capabilities.
We can accelerate the growth of this.
Particular business.
And some of the other companies that we're looking in Europe . They are similar.
Similar companies because in Europe , what has happened with energy prices being what they are.
Especially some of these distributed generation.
For the commercial and industrial customers and now its beginning.
Any traditional on balance of the governments see this imbalance.
The market is picking up.
Okay.
I think for US we developed it.
<unk> management team and this particular company I think we can grow it.
And I think if you look at the landscape over there.
Having gone outwards.
Found this company.
No banker process here. This is kind of outreach that we're doing is we're looking to expand our own business across the region. There arent any particular geographies.
That are.
Where we are where we're focusing 100% of our time, we're being opportunistic we're finding we're finding the finding the opportunities where the <unk>.
As like intercourse.
Can be kind of tucked in.
I think the U.
And you've seen the expansion of our activities in Greece.
Certainly like Italy, we're not going to go into markets, where we're not going to be able to compete.
I think it is.
Again, its opportunistic and we think there is certainly some going to be some more opportunity out there for us.
Got it that's very helpful. And then maybe just on the FTE progress I think you had called out $35 million last quarter that you expected to be 2023 revenue.
But I wanted to kind of focus on it looks like the cost in estimated earnings in excess of billings came down again I wanted to get a sense of.
Timing around payments, if we have a sense of when that starts to look like a more normal number again, if you have any visibility on that.
I mean from a from an Unbilled perspective you.
Youre talking about more or less.
The bulk of it is when substantial completion on mission.
Alright.
So we as we said the timing wise, we're looking to complete these projects by the summer.
So I think thats kind of what you would see the invoices circle.
Okay great.
And then maybe just last one of the 80 to 100 megawatt equivalents additions for this year can you give a mix between solar batteries and R&D and then.
Any sense of the cadence would be helpful. There.
Hakan.
Okay.
I think we're.
Looking at.
So.
Sorry give me a second to get the numbers.
Okay.
So we think that the RMG, we are talking about.
22 megawatts.
Out of that 80 to 100.
Okay.
And the rest of it is a mix between solar and battery.
Alright.
Okay.
Thanks, guys.
Thank you.
One moment please for our next question.
Our next question will come from Tim Mulrooney, William Blair. Your line is open.
Good afternoon everybody.
So apologies for the overly simplistic question, but I had in my notes that you expected the complete one RMG plant in 2021, three in 2022 and five to six in 2023.
But today I think.
You said three in 'twenty, three and five to six in 2024, so that the whole RMG completion timeline essentially get.
Pushed out by a year or my notes incorrect.
The one in 'twenty one.
'twenty one that came in mechanical compared to 'twenty, one and then wanted to there were three youre going to correct and then there were.
Five to six.
Beyond that.
Yeah.
The actual delay it's between four to eight months.
On.
Between the three.
Five to six 5% to six became four to five because it actually two plants.
We will contemplate into go to renewable natural gas in Brazil convergence now.
We stopped doing any work on them, because we will most likely keep them to the hearings.
So I would say six to four to eight months delay.
Got it thanks George.
Yes.
You talked about for my second question you talked about that.
20%, essentially 20% EBITDA CAGR between 2022 and 2024.
And I understand given the timing of projects and such that the two year timeframe is probably a better way to look at things, but stepping back and thinking about that two year timeframe, how should we think about how much of that growth.
It's coming from projects versus EBITDA coming in from some of your energy operating assets.
Yeah, I think the project business.
That's going to grow.
Yeah.
And to 12 to 13.
If you were to take it from 'twenty, one going forward.
Rather than taking it from.
Last year to go forward in the rest of it comes from the asset and the O&M. The R&M has been growing very well and the other business.
They are contributing quite a bit as well.
Yeah.
Got it okay. Thank you very much.
Okay.
Thank you.
Once again, one moment our next question.
Our next question will come from Kelly Harrison of Piper Sandler Your line is open.
Hi, good afternoon, everybody and thank you for taking the question.
I'm so sorry.
Just wanted to just a quick question on the <unk> guide $230 million of revenues implies.
Implies a pretty big ramp.
<unk> and <unk> to get to the full year guide of $1 5 billion. I think you indicated there is some push outs behind the soft Q1, but can you maybe share some more details on what exactly.
That gives you the confidence in that big recovery as we think about <unk> and then maybe just share some color on how much of the revenue guide is already secured by the 12 month project.
<unk> backlog.
Yes.
Yes. This is mark so I think again as we've talked about before our confidence in anything that we guide comes from the visibility that we have from the backlog on the project side. So we are better than 80% of the project revenues coming from our either contract are awarded.
And then from a total revenue perspective more than 70% is coming from what we would consider contracted sources. So I think we have really good visibility in terms of how that will how we're able to achieve that ramp throughout the throughout the end of the year.
There's always some amount thats going to come from.
<unk>, but again I think we have decent line of sight to what those opportunities are going to be.
So we're going to be able to fill that in between Q1 and the end of the year.
Helpful. Thank you and then as my follow up just a quick question on cash flows.
So 2022 adjusted cash flow from ops was $100 million use of cash I would imagine that was driven by the Edison project.
With the billings looking to go out in the summer of the year I was wondering if you could just maybe give us some color on how youre thinking about adjusted cash flow from ops in 'twenty three based on the midpoint of your guidance.
Yes, I mean, we'd have generally guided to that but as Don was saying we expect to wrap these projects up by the summer and a lot of that is tied up right now in the Unbilled revenue.
Everything to date that we that we have been able to bill contractually we have been paid for.
So we would expect those cash flows to come in.
Soon after the projects are completed.
Which I think should directionally.
Just wanted to watch improved adjusted cash from ops number yes.
Yes.
As you know.
But as we talked about substantial completion being the next center important billing points, depending on when we.
Well, if we can get the weather to continue.
In California, we are we wrap these projects up I think with the payment terms you might see some of the cash flow actually coming in the beginning of Q3.
Depending on when the bills go out so.
Can't say that it would be a specific quarter here, but that's the timeframe we're talking about.
When you'll see the kind of turnaround.
Got it thank you.
Thank you.
One moment please for our next question.
Our next question will come from Joseph Osha.
<unk> Guggenheim Partners. Your line is open.
Alright. Thank you it is a mouthful.
Following on what what cashew was asking I'm wondering as we think about that EBITDA run rate, which obviously comes out of 2023 at a considerably higher.
That goes in.
Is this just straightforward cost absorption or there is some mix shifts on a quarter by quarter basis in terms of the revenue mix that we should think about I just want to understand what the walk from Q1 to Q4 EBITDA looks like.
I don't know that we have.
Any.
Anything really granular to share with you there Joe.
<unk>.
Outlet George talked about where we've kind of gone back and recalculate, even some things that were expecting contract signing some of those larger projects carry with them a good amount of.
Costs in preparation for signing so it could get a little bit of red.
Revenue charge once the once the contracts get signed in and this is ware.
Having push outs that go not just from one quarter to the next but maybe.
One quarter two quarters later.
We're seeing a little bit of that here in that that kind of explains some of that ramp and especially as you start to work on full execution.
In those projects in the latter half of the year.
Theres anything really meaningful to share as far as mix, though.
For the balance of the year again.
We've got our typical seasonality.
We're going to see.
The ramp up over the course of the year, just kind of progressively moving from.
The Q1 up to what we expect to be.
A more back end of Q3 and four.
And what am I am.
What compounded some of the project to date set for this <unk>.
<unk>, which happens lets say you lose three months on a particular project and especially the larger ones.
A couple of months to mobilize and Thats why I am.
Made the statement we go to court.
It takes time too.
Those projects turn into consigned by then to mobilize them and then see some revenues real revenues coming through.
Construction site.
That's right. Thank you and then the later.
Okay.
As a follow up.
Obviously, you've got some additional storage projects in the backlog that we've been talking about I'm wondering what.
You all the lessons learned are from.
From FTE and how Thats changed your approach to.
How you source cells for future projects, how your contract how are you.
Going to come at this next.
Around the storage products.
<unk> different way to hopefully maybe avoid replaying, what's happening with SCE. Thank you.
Well I'll start with the.
We think that was actually a really well done contract.
The lessons that we learned.
Two with well.
How well are you prepared for a force majeure event.
Are you prepared for <unk>.
Supply chain to be shutdown in Shanghai or shipping etcetera, So I think thats.
That's what's been.
Causing us.
Most of the delays as we talked about the other the other delays associated with this is.
Or related to socal desire to have those projects.
Go into grid sync in 2023.
So.
One of the well I'll call. It a lesson learned but it's actually important thing that we got a carry through to.
Our future projects is there is no.
The wallet.
There is no there is nothing more valuable than having a very solid open and honest relationship with your customer.
That's a theme that this company follows with a lot of lot of project, but our relationship with Socal Ed has been.
It has been open and honest from the beginning.
We have continuous high level executive meetings.
I think that that's that's of critical importance. So when we are approaching new proposals new opportunities.
That's one of the important pieces of the puzzle is to ensure that some of us on the executive management team get involved early on and get to know the management teams at our Counterparties and our suppliers to ensure that we can we can manage a smooth process for what sometimes can be large large projects. So.
At the end of the day, we feel really great about the project that we built.
We feel like it's adding adding a lot to our resume in.
I think we're.
We're we're spending we're spending a lot of time looking at the way that was executed in using the resources that are working on those projects and that worked on the contracting on all of the proposals that we're working on going forward to ensure that there is.
There is a mind share with respect to the way we approach the new the new projects.
I'm, sorry, my AD and that's why I said in my opening remarks.
We have become a company to go to and we are working with several project right now.
Along those lines similar to the southern California.
Right.
You might recall, when we signed that contract in September in 2021.
We thought we would come in out of the call.
19 situation, but then we ended up when you back into it.
And we had the supply chain issues that.
Basically we execute that project into what I call unprecedented situation.
I think we did pretty well.
Okay. Thank you guys.
Thank you Joe.
Thank you.
One moment please for our next question.
Our next question will come from Chip Moore of Es hunted Huntington.
Your line is open.
Thanks.
Body.
Wanted to ask a question on visibility as it relates to <unk>.
But do you think customers, maybe you get better clarity on potential funding opportunities and then how do you sort of any cap risks for any push outs, there or potential for acceleration.
Okay.
I don't know that I wouldn't necessarily frame it in the context of push outs or acceleration. So I think as that treasury guidance comes out.
It seems like our customers.
Our advisors are kind of waiting with bated breath as soon as come out as soon as the guidance comes out they jump on it and they're immediately in contact and cotton.
In fact with us about okay, well, what do we do next they do seem eager but it is out of all of our control collectively.
The pace with which the government will actually issued guidance again anecdotally.
The same day.
Treasury came out with the guidance on low income communities.
The clients were E mailing us right.
Okay ready to go here. We go. This is this is the project and this is where we think it's going to apply and so on and so forth, but we're.
So I think thats.
And that's going to be an interesting dynamic.
The guidance comes out there is likely to be some scrambling.
I think.
As George has talked about number of times.
We also need to be realistic about execution timetables with our customers.
Ensure that once we have certainty on structure supported by the IRI that we have time to.
Pursue execution procure equipment et cetera.
Got it thank you Gordon.
Thank you.
Due to time, we're going to ask that everyone limit themselves to just one question. So we can get as many people as possible.
Our next question will be coming out shortly.
Our next question will come from Pavel <unk>, Raymond James again.
Just one question please.
Yes.
Thanks for taking the question you have been asked several times about higher interest rates I'd like you to also talk about.
Higher utility rates.
And how that's affecting both the efficiency side of the business and your solar power plant development. Thanks.
Sure.
The higher interest rates, that's wise on any project that we underwrite, let's say solar or whatever the asset that we all know ourselves we've taken into account venue interest rates.
And of course, the performance contracts and Thats why that goes it on what I said earlier on that contract we have to go back and renegotiate the baseline energy prices, we use the current prices rather than the old one and Thats what made that project expense allowance, even though it's a.
Higher interest rates.
But they do impact US no question about it but.
Yes.
But on the other hand over the quarter to the energy prices have gone up.
July's performance contracts and.
No.
On the assets, we own we take that into account when we go out we shop and we see what the long term rates will be in the long term rates have been going up as much as the short term rates.
The short term to embrace impact us on the working capital that we use on the line.
And I think the higher energy rates elsewhere in the country.
For purposes of offtake contracts et cetera.
I do believe there is a little bit of a lag there with respect to any of those.
Catching up with where the energy prices are going just given the long development cycles some of the assets but.
Our expectation is the same.
The same thing will happen there.
Thank you.
One moment please for our next question.
Okay.
Our next question will come from Ben <unk> of Baird. Your line is open.
Hey, guys.
Jordan when you gave them.
For EBITDA next year, there was no <unk>. So could you just talk about.
What's.
Sure.
For next year versus what's not good for next year EBITDA.
No.
Big question, sorry, Rob good question as well.
Ramp.
From this year to EBITDA next year.
The drivers of that.
If you could just maybe the biggest driver the second biggest driver.
Okay.
Youre welcome.
We have not taken any.
Potential impacts from the Io rate, it's based again on the project.
A good chunk of that will come from the project execution, but a substantial number will come from the essence replace an operation for example, I know we.
The number of vessels, we put inauguration last year wasn't a number were contemplated but 40 megawatts of.
Assets will go in this first quarter.
And that will help a lot and then of course the.
Sure.
LNG assets that will go into operation by the end of the year and couple of them they come on earlier.
Early in 2024, so they will contribute as well.
So and then we have a couple of battery project.
We are working on.
And then the other business they can become a good contributor now.
And as a business.
It will help as well I don't know.
If you want to add any more color on North Park.
No I think that pretty much says it thanks George.
Thank you.
Okay.
And that will be all the time, we have for the Q&A session. This will also conclude today's conference call. Thank you all for participating you may all disconnect and have a pleasant day.
Okay.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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Okay.
Okay.
Okay.
Okay.
Okay.
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Yes.